CASPIAN-GAASTRA FIRE AUTHORITY. Financial Report With Supplemental Information Prepared in Accordance with GASB 34. June 30, 2016

Transcription

1 Financial Report With Supplemental Information Prepared in Accordance with GASB 34 June 30, 2016

2 TABLE OF CONTENTS INDEPENDENT AUDITOR'S REPORT... 3 MANAGEMENT'S DISCUSSION AND ANALYSIS... 7 BASIC FINANCIAL STATEMENTS STATEMENT OF NET POSITION STATEMENT OF ACTIVITIES GOVERNMENTAL FUNDS - BALANCE SHEET...20 GOVERNMENTAL FUNDS - RECONCILIATION OF BALANCE SHEET OF GOVERNMENTAL FUNDS TO NET POSITION GOVERNMENTAL FUNDS - STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS - RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES STATEMENT OF NET POSITION DISCRETELY PRESENTED COMPONENT UNITS.24 STATEMENT OF ACTIVITIES DISCRETELY PRESENTED COMPONENT UNITS REQUIRED SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE - GENERAL FUND OTHER SUPPLEMENTAL INFORMATION GENERAL FUND - BALANCE SHEET GENERAL FUND - STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE ACTUAL AND BUDGET DEBT RETIREMENT FUND BALANCE SHEET DEBT RETIREMENT FUND - STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BALANCE SHEET - DISCRETELY PRESENTED COMPONENT UNIT..84 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - DISCRETELY PRESENTED COMPONENT UNIT 85 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS SCHEDULE OF FINDINGS AND RESPONSES Page 2

3 INDEPENDENT AUDITOR'S REPORT 3

4 DS Rostagno, CPA, P.C. 101 West Maple Street, Iron River, MI Tel (906) Fax (906) Governing Board Caspian-Gaastra Fire Authority P.O. Box 530 Caspian, Michigan INDEPENDENT AUDITOR'S REPORT Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Caspian-Gaastra Fire Authority, Caspian, Michigan, as of and for the fiscal year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the Authority s basic financial statements as listed in the Table of Contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, and with the standards prescribed by the State Treasurer. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 4

5 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Caspian-Gaastra Fire Authority, Caspian, Michigan, as of June 30, 2016, and the respective changes in the financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information on pages 8 through 15, and on page 78, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Caspian-Gaastra Fire Authority, Caspian, Michigan s basic financial statements. The combining and individual non-major fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual non-major fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual non-major fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. 5

6 Other Reporting Required by Governmental Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 22, 2016 on our consideration of the Caspian-Gaastra Fire Authority, Caspian, Michigan s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Caspian-Gaastra Fire Authority, Caspian, Michigan internal control over financial reporting and compliance. Dianne S. Rostagno, CPA DS ROSTAGNO, CPA, P.C. September 22,

7 MANAGEMENT'S DISCUSSION AND ANALYSIS 7

8 ONE MUSEUM DRIVE P.O. BOX 350 CASPIAN, MI The management of the Caspian-Gaastra Fire Authority provides this narrative overview and analysis of the financial activities of the Caspian-Gaastra Fire Authority for the fiscal year ended June 30, As readers, you are encouraged to read this discussion and analysis in conjunction with the Authority's financial statement information included in this report. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Authority's basic financial statements. The financial section of this report includes management's discussion and analysis, the basic financial statements, and required supplementary information. The basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the Authority's finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the Authority's assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Fire Authority is improving or deteriorating. The Statement of Activities presents information showing how the government's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. Fund Financial Statements The Fire Authority, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. In the basic financial statements, the emphasis of the fund financial statements is on major funds. All of the funds of the Fire Authority are governmental funds. The notes to the financial statements are an integral part of this report. 8

9 ONE MUSEUM DRIVE P.O. BOX 350 CASPIAN, MI Governmental Funds Governmental Funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as balances of spendable resources available at the end of the fiscal year. This information may be useful in evaluating the Authority's near-term financing requirements. Because the focus of the governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. In order to provide the reader with information to better understand the long-term impact of the government's near-term financing decisions, a reconciliation between the government-wide financial statements and the fund financial statements is included as part of the basic financial statements. The Fire Authority maintains two governmental funds. Information is presented separately in the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and changes in fund balance for the general fund and debt service fund, both of which are considered major funds. The Fire Authority adopts an annual budget for its general fund. To demonstrate compliance with this budget, a budgetary comparison statement has been provided for the general fund, and is included in the "Required Supplementary Information" section of this document. Notes to the Financial Statements Notes to the financial statements are included in the basic financial statements, and provide additional information that is essential for a full understanding of the data provided in the government-wide and the fund financial statements. Supplementary Information Required supplementary information follows the basic financial statements, and includes budgetary comparison schedules for the General Fund as presented in the governmental fund financial statements. The notes to the financial statements are an integral part of this report. 9

10 CASPIAN-GAASTR FIRE AUTHORITY ONE MUSEUM DRIVE P.O. BOX 350 CASPIAN, MI Government-wide Financial Analysis In time, net position of a governmental entity may serve as a useful indicator of the government's financial position. In the case of the Fire Authority, assets exceeded liabilities by $143,615 at June 30. By far, the largest portion of the Authority's net position is its investment in capital assets (land, buildings, machinery, and equipment), less any outstanding debt related to acquiring the asset. These capital assets are used to provide services to citizens and are not available for future spending. Although the Authority's investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. At June 30, 2016, the Authority reported $111,750 in net investment in capital assets. Summary of Net Position In a condensed format, the following is a comparative summary of the Authority's net position at June 30, 2016 and June 30, 2015: June 30, 2016 June 30, 2015 Governmental Governmental Activities Activities Assets Current and other assets $ $ Capital assets, net Total Assets $ $ Liabilities Long-term liabilities $ $ Other liabilities Total Liabilities $ $ The notes to the financial statements are an integral part of this report. 10

11 ONE MUSEUM DRIVE P.O. BOX 350 CASPIAN, MI Government-wide Financial Analysis Summary of Net Position (Continued) June 30, 2016 June 30, 2015 Governmental Governmental Activities Activities Net Position Net investment is $ $ Capital Assets Restricted for Debt Services 0 0 Unrestricted Total Net Position $ $ The notes to the financial statements are an integral part of this report. 11

12 ONE MUSEUM DRIVE P.O. BOX 350 CASPIAN, MI Government-wide Financial Analysis For governmental activities, net position increased by $12,995 during the year. The following represents the comparative changes in net position for the Authority's governmental funds for the fiscal years ended June 30, 2016 and June 30, 2015: June 30, 2016 June 30, 2015 Governmental Governmental Activities Activities REVENUES Program Revenues Charges for services $ $ Operating grants and contributions Capital grants and contributions 0 0 General Revenues Investment earnings 8 6 Other TOTAL REVENUES $ $ EXPENSES Administration $ 6643 $ 6795 Fire Protection Debt Service Interest and fees Depreciation TOTAL GOVERNMENTAL EXPENSES $ $ Increase (Decrease) in Net Position Net Position, Beginning of Year Prior Period Adjustment (0) (0) Net Position, End of Year $ $ The notes to the financial statements are an integral part of this report. 12

13 ONE MUSEUM DRIVE P.O. BOX 350 CASPIAN, MI Government-wide Financial Analysis Governmental Activities Operating grants and contributions were $16,094, or approximately 31 percent of total governmental revenues. Charges for services, including operating assessments, were $32,353, or approximately 62 percent of governmental revenues. The Fire Authority expended $39,658 on governmental programs and services. The largest expense category was incurred for fire protection, which totaled $25,028 or approximately 64 percent of total expenditures. Interest on long-term debt comprised $198, or approximately 1 percent of total expenditures. Financial Analysis of the Governmental Funds As previously noted, the Fire Authority uses fund accounting to ensure and demonstrate compliance with finance-related requirements. Governmental Funds The focus of the Fire Authority's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. This information is useful in assessing the Authority's financing requirements. In particular, the unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. The Authority's governmental funds reported combined ending fund balances of $31,865, all of which is unassigned and is available for spending at the government's discretion. The Authority's primary governmental fund is its general fund. There are no reservations in the general fund's fund balance. On the budgetary basis of accounting, the Authority ended the fiscal year with revenues slightly lower than the final budgetary projection. Total expenditures were lower than the final and original budget projections. At fiscal year end, the fund balance was lower than both the final amended budget and the original projection. The notes to the financial statements are an integral part of this report. 13

14 ONE MUSEUM DRIVE P.O. BOX 350 CASPIAN, MI Governmental Funds (Continued) Revenues Budget vs Actual for the Fiscal Year Ended June 30, 2016: Revenues Revenues Variance Variance Revenues Revenues Revenues Actual vs Actual vs Original Final Final Original Final Budget Budget Actual Budget Budget General Fund $ $ $ $ (1046) $ (1702) Expenditures Budget vs Actual for the Fiscal Year Ended June 30, 2016: Expenditures Expenditures Variance Variance Expenditures Expenditures Expenditures Actual vs Actual vs Original Final Final Original Final Budget Budget Actual Budget Budget General Fund $ $ $ $ (4334) $ (4990) General fund financial and budgetary highlights of the fiscal year include: Charges for services were less than the original and amended budget by $647; use of money and property was higher than the original budget by $3 but less than the final budgeted amount by $335. Other revenue was more than the original budget by $318. Expenditures in total for the general fund were $33271, which was $4,990 lower than projected in the amended budget. Administration, public safety, and capital outlay came in slightly lower than projected budget line items. The notes to the financial statements are an integral part of this report. 14

15 ONE MUSEUM DRIVE P.O. BOX 350 CASPIAN, MI Capital Assets and Debt Administration Capital Assets The Authority s investment in capital assets, net of accumulated depreciation, for its governmental activities as of June 30, 2016 is $125,090. The investment in capital assets includes land, buildings, fire truck, and equipment, protective gear, communications equipment, and other safety equipment. Long-term debt As of June 30, the Fire Authority had total debt outstanding of $13,340. The following areas highlight the Fire Authority's priorities and accomplishments: To provide the Fire Authority with top quality fire protection at the lowest possible cost. To this end, the Fire Authority has strived to support current firefighters and to recruit and train new firefighters. The Authority also performed upgrades on the FF equipment in the current fiscal year. Future plans include: Continuation with the improvement of the Fire Authority's equipment and performance programs, and by maintaining and upgrading fire equipment through timely repair and grant applications to fund improvements, as well as to fund the purchases of a new fire truck. Requests for Information This financial report is designed to provide a general overview of the Fire Authority's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to: Caspian-Gaastra Fire Authority P.O. Box 530 Caspian, Michigan The notes to the financial statements are an integral part of this report. 15

16 BASIC FINANCIAL STATEMENTS 16

17 STATEMENT OF NET POSITION Governmental Component Reporting Activities Units Entity Totals ASSETS Current Assets Cash and Investments (Note C ) $ 24,420 $ 7,221 $ 31,641 Accounts Receivable 6,323-6,323 Prepaid Insurance 3,201-3,201 Total Current Assets 33,944 7,221 41,165 Noncurrent Assets Capital Assets, Net (Note H ) 125, ,090 Total Noncurrent Assets 125, ,090 TOTAL ASSETS $ 159,034 $ 7,221 $ 166,255 LIABILITIES Current Liabilities Accounts Payable 2,079-2,079 Bonds/Notes Payable, Due within one year (Note I ) Total Current Liabilities 2,079-2,079 Noncurrent Liabilities Bonds/Notes Payable (Note I ) 13,340-13,340 Total Noncurrent Liabilities 13,340-13,340 TOTAL LIABILITIES $ 15,419 $ - $ 15,419 NET POSITION Net investment in Capital Assets 111, ,750 Restricted for Debt Services Unrestricted 31,865 7,221 39,086 TOTAL NET POSITION $ 143,615 $ 7,221 $ 150,836 The notes to the financial statements are integral part of this report. 17

18 STATEMENT OF ACTIVITIES YEAR ENDED PROGRAM REVENUES Functions/Programs Operating Charges Grants & Capital Expenses for Services Contributions Grants Primary Government Public Safety: Administration $ 6,643 $ - $ - $ - Fire Protection 25,028 32,353 16,094 - Interest on Long-Term Debt Depreciation (Unallocated) 7, Total Governmental Activities $ 39,658 $ 32,353 $ 16,094 $ - Component Units Caspian-Gaastra Volunteer Fire Department 16,763 4, General Revenues Miscellaneous Income Fundraising Interest and Investment Earnings Change in Net Position Total General Revenues Net Position - Beginning of year Net Position - End of year 18

19 STATEMENT OF ACTIVITIES YEAR ENDED Net(Expense) Revenue and Changes in Net Position Governmental Activities Component Units $ (6,643) $ - 23,419 - (198) - (7,789) - $ 8, (12,275) 4,198 1,281-10, ,206 11,549 12,995 (726) 130,620 7,947 $ 143,615 $ 7,221 The notes to the financial statements are integral part of this report. 19

20 GOVERNMENTAL FUNDS BALANCE SHEET General Debt Service Total Governmental Funds ASSETS Cash and Investments (Note C ) $ 24,420 $ - $ 24,420 Accounts receivable 6,323 6,323 Prepaid Insurance 3,201-3,201 TOTAL ASSETS $ 33,944 $ - $ 33,944 LIABILITIES AND FUND BALANCES LIABILITIES Due To General Fund Accounts Payable 2,079-2,079 TOTAL LIABILITIES 2,079-2,079 FUND BALANCES Restricted for Debt Service Unassigned 31,865-31,865 TOTAL FUND BALANCES 31,865-31,865 TOTAL LIABILITIES AND FUND BALANCES $ 33,944 $ - $ 33,944 The notes to the financial statements are integral part of this report. 20

21 GOVERNMENTAL FUNDS RECONCILIATION OF BALANCE SHEET OF GOVERNMENTAL FUNDS TO NET POSITION Fund Balances - Total Governmental Funds $ 31,865 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and are not reported in the funds. The cost of capital assets is: 436,304 Accumulated depreciation is: (311,214) Long term liabilities are not due and payable in the current period and are not reported in the funds: Bonds and Notes Payable (13,340) Other long term assets not available to pay current period expenditures therefore deferred in the funds - Accrued interest is not included as a liability in governmental funds - Amounts due to other non-governmental funds are not reported in the government-wide financial statements - Total Net Position - Governmental Activities $ 143,615 The notes to the financial statements are an integral part of this report. 21

22 GOVERNMENTAL FUNDS - STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES YEAR ENDED Debt Total Service Governmental General Fund Funds REVENUE Local Unit Assessments $ 30,000 $ 16,094 $ 46,094 Use of money and property 8-8 Charges for Services 2,353-2,353 Miscellaneous 4,198-4,198 Intergovernmental TOTAL REVENUE $ 36,559 $ 16,094 $ 52,653 EXPENDITURES Current Operating: Administration 6,643-6,643 Public Safety 25,028-25,028 Debt Service Principal - 22,856 22,856 Interest and Fees Capital Outlay 1,600-1,600 TOTAL EXPENDITURES $ 33,271 $ 23,054 $ 56,325 Excess (Deficiency) of Revenues Over Expenditures 3,288 (6,960) (3,672) OTHER FINANCING SOURCES (USES) Operating Transfers In (Out) (6,960) 6,960 - Net Change in Fund Balances (3,672) - (3,672) FUND BALANCE - BEGINNING OF YEAR 35,537-35,537 FUND BALANCE - END OF YEAR $ 31,865 $ - $ 31,865 The notes to the financial statements are an integral part of this report. 22

23 GOVERNMENTAL FUNDS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED Net Change in Fund Balances - Total Governmental Funds $ (3,672) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures; in the statement of activities, these costs are allocated over their estimated useful lives as depreciation. Depreciation Expense (7,789) Capital Outlay 1,600 Total (6,189) Revenue reported in the statement of activities that does not provide current financial resources and are not reported as revenue in the governmental funds - Accrued interest is recorded in the statement of activities when incurred; it is not reported in governmental funds until paid - Repayment of bond principal is an expenditure in the governmental funds, but not in the statement of activities (where it reduces long term debt) 22,856 Increases Decreases in compensated absences are reported as expenditures when financial resources are used in the governmental funds in accordance with GASB Interpretation No. 6 - Loan proceeds are reported as other financing sources in the governmental funds, but are not reported in the statement of activities - Change in Net Position of Governmental Activities $ 12,995 The notes to the financial statements are an integral part of this report. 23

24 STATEMENT OF NET POSITION Discretely Presented Component Units ASSETS Current Assets Cash and cash equivalents $ 7,221 Total Current Assets 7,221 TOTAL ASSETS 7,221 LIABILITIES Current Liabilities Accounts Payable - Total Current Liabilities - TOTAL LIABILITIES - NET POSITION Net investment in capital assets - Unrestricted 7,221 TOTAL NET POSITION $ 7,221 The notes to the financial statements are an integral part of this report. 24

25 STATEMENT OF ACTIVITIES Discretely Presented Component Units YEAR ENDED Charges for Services Operating Grants and Contributions Net (Expense) Revenue and Change in Net Position Expenses Caspian-Gaastra Volunteer Fire Department $ 16,763 $ 4,008 $ 480 $ (12,275) $ 16,763 $ 4,008 $ 480 $ (12,275) General Revenues: Fundraising 10,257 Interest and Investment earnings 11 Miscellaneous 1,281 Total General Revenues 11,549 Change in Net Position (726) Net Position-Beginning of Year 7,947 Net Position-End of Year $ 7,221 The notes to the financial statements are an integral part of this report. 25

26 26

27 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting methods and procedures adopted by the Caspian-Gaastra Fire Authority, Caspian, Michigan, conform to generally accepted accounting principles as applicable to governmental entities. The following is a summary of the more significant policies: THE FINANCIAL REPORTING ENTITY The Caspian-Gaastra Fire Authority was formed to organize, equip, and manage a fire department to provide fire protection for the land areas within the boundaries of the cities of Caspian and Gaastra. The Caspian- Gaastra Fire Authority was formed on February 01, 2001, and, as provided by statute, operates under a Governing Board which consists of 2 members appointed by the governing body of each respective municipality, plus one additional member selected by the Board who shall be a resident of a participating municipality. 27

28 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES THE FINANCIAL REPORTING ENTITY (Continued) The criteria established by professional standards is used to determine the primary government unit and the component units to be included in the financial reporting entity. These standards describe the characteristics of a primary government unit, which includes a separately elected governing board, legally separate government possessing corporate power and separate legal standing, and fiscal independence. These standards also provide criteria for defining the component unit, based on the fundamental concept of accountability. BLENDED COMPONENT UNITS A blended component unit is a legally separate entity from the local unit, but is so intertwined with the local unit that it is, in substance, the same as the local governmental unit. 28

29 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BLENDED COMPONENT UNITS (Continued) A basic strategy of these professional standards is to present financial information for component units separately from the financial information for the primary government. This is achieved through the discrete presentation method. However, in the case of blended component units, GASB believes that it would be more appropriate to use the blending method to incorporate the financial information of a component unit into the reporting entity's financial statements. When the blending method is used, transactions and balances of a component unit are merged with similar transactions and balances of the primary government so that there is no way to identify which balances relate to the component unit and which relate to the primary government. 29

30 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BLENDED COMPONENT UNITS (Continued) On the basis described above, the financial statements of the Caspian-Gaastra Volunteer Fire Department are included in the financial statements of the Caspian- Gaastra Fire Authority as a discretely presented component unit. JOINT VENTURES A joint venture is a legal entity or other organization that results from a contractual agreement and that is owned, operated, or governed by two or more participants as a separate and specific activity subject to joint control, in which the participants retain an ongoing financial interest or an ongoing financial responsibility. An ongoing financial responsibility is determined as a participating government's obligation in some manner for debts or the joint venture's existence depends on continued funding by the participating government. 30

31 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES JOINT VENTURES (Continued) There are no joint ventures to be reported. JOINTLY GOVERNED ORGANIZATIONS A jointly governed organization is a multi-governmental arrangement that is governed by representatives from each of the governments that create the organization, but that is not a joint venture because the participants do not retain an ongoing financial interest or responsibility. There are no jointly governed organizations to be reported. RELATED ORGANIZATIONS A related organization is an organization for which a primary government is not financially accountable (because it does not impose will or have a financial benefit or burden relations) even though the primary government appoints a voting majority of the organization's governing board. 31

32 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RELATED ORGANIZATIONS (Continued) There are no related organizations to be reported. BASIS OF PRESENTATION The Fire Authority follows GASB Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. GASB Statement No. 34 adds the following components to the financial statements: Management's Discussion and Analysis A narrative introduction and analytical overview of the government's financial activities. This analysis is similar to the analysis the private sector provides in their annual reports. Government-wide financial statements These include financial statements prepared using full accrual accounting for all of the government's activities. 32

33 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) Government-wide financial statements (Continued) This approach includes not just current assets and liabilities (such as cash and accounts payable) but also capital assets and long-term liabilities (such as buildings and infrastructure, including bridges and roads, and general obligation debt). Annual accounting also reports all of the revenues and costs of providing services each year, not just those received or paid in the current year or soon thereafter. The government-wide statements include the Statement of Net Position and the Statement of Program Activities. Government-wide and Fund Financial Statements The Authority has implemented the following pronouncements: GASB Statement 62 Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. 33

34 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) Government-wide and Fund Financial Statements (Continued) GASB Statement 62 (Continued) The objective of this Statement is to incorporate into the GASB s authoritative literature certain accounting and financial reporting guidance issued on or before November 30, 1989, which does not conflict with or contradict GASB pronouncements. GASB Statement 63 Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position and Statement 65 Items previously reported as Assets and Liabilities. 34

35 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) Government-wide and Fund Financial Statements (Continued) GASB Statement 63 (Continued) These Statements provide financial reporting guidance for deferred outflows of resources and deferred inflows of resources, defined as a consumption of net assets by the government that is applicable to a future reporting period, and an acquisition of net assets by the government that is applicable to a future reporting period, respectively. The Statement also identifies net position as the residual of all other elements presented in a statement of financial position. 35

36 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) Government-wide and Fund Financial Statements (Continued) GASB Statement 63 (Continued) This Statement amends the net asset reporting requirements in Statements No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments, and other pronouncements by incorporating deferred outflows of resources and deferred inflows of resources into the definitions of the required components of the residual measure and by renaming that measure as net position, rather than net assets. The District adopted the provisions of GASB Statement Number 63 (GASB 63), Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. In compliance with GASB 63 the Statement of Net Assets became the Statement of Net Position. 36

37 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) Government-wide and Fund Financial Statements (Continued) GASB 63 (Continued) GASB 63 requires that deferred outflows be reported in a separate section following assets, and deferred inflows be reported in a separate section following liabilities. Net position includes the net effects of assets, deferred outflows of resources, liabilities, and deferred inflows of resources. Statement of Net Position The Statement of Net Position displays the financial position of the primary government (government and business-type activities). Governments report all capital assets, including infrastructure, in the government-wide Statement of Net Position and report depreciation expenses - the cost of "using up" capital assets - in the Statement of Activities. 37

38 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) Statement of Net Position (Continued) The net position of a government are broken down into three categories - 1) net investment in capital assets, 2) restricted; and 3) unrestricted. Statement of Program Activities The statement of program activities reports expenses and revenues in a format that focuses on the cost of the government's functions. The expense of individual functions is compared to the revenues generated directly by the function (for instance, through user charges or intergovernmental grants). 38

39 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) GASB 65 The District adopted the provisions of GASB Statement Number 65 (GASB 65), Items Previously Reported as Assets and Liabilities. GASB 65 clarifies the reporting of deferred outflows of resources and deferred inflows or resources to provide consistency in financial reporting. GASB Statement 65 also states that bond issuance costs should be expensed in the year in which they are incurred. Budgetary comparison schedules Demonstrating compliance with the adopted budget is an important component of a government's accountability to the public. 39

40 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) Budgetary comparison schedules (Continued) Many citizens participate in the process of establishing the annual operating budgets of state and local governments, and have a keen interest in following the actual financial progress of their governments over the course of the year. The Fire Authority and many other governments revise their original budgets over the course of the year for a variety of reasons. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The basic financial statements include both governmentwide (based on the Fire Authority as a whole) and fund financial statements. The reporting model focus is on both the Fire Authority as a whole and the fund financial statements, including the major individual funds of the governmental categories. 40

41 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued) The criteria applied for major fund qualification is as follows: 1) Total assets, liabilities, revenues, or expenditures/expenses (excluding extraordinary items) of an individual fund are at least 10% of the corresponding total for a fund type. 2) Total assets, liabilities, revenues, or expenditures/expenses (excluding extraordinary items) of an individual fund are at least 5% of the corresponding total for the total of all governmental and enterprise funds combined. Assets, or any other elements taken one a time would have to pass both the 10% test and the 5% test for the fund to be required to be considered a major fund. 41

42 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED BASIS OF PRESENTATION (Continued) GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued) Both the government-wide and fund financial statements (within the basic financial statements) categorize primary activities as governmental. In the government-wide Statement of Net Position, the governmental column (a) is presented, and (b) is reflected, on a full accrual, economic resource basis, which incorporates long-term assets and receivables as well as long-term debt and obligations. Both government-wide and fund financial statement presentations provide valuable information that can be analyzed and compared (between years and between governments) to enhance the usefulness of the financial information. The Fire Authority generally uses restricted assets first for expenses incurred for which both restricted and unrestricted assets are available. 42

43 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED BASIS OF PRESENTATION (Continued) GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued) The Fire Authority may defer the use of restricted assets based on a review of the specific transaction. The government-wide Statement of Activities reflects both the gross and net cost per functional category (public safety) that is otherwise being supported by general government revenues (interest and investment earnings). The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants, and contributions. The program revenues must be directly associated with the function (public safety). 43

44 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED BASIS OF PRESENTATION (Continued) GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued) Program revenues include 1) charges to customers for fire protection and 2) grants and contributions that are restricted to meeting the operation or capital requirements of a particular function or segment. Other items not properly included among program revenues are reported as general revenues. The Fire Authority does not allocate indirect expenses. When applicable, the operating grants and contributions column includes operating-specific and discretionary (either operating or capital) grants while the capital grants and contributions column reflects capitalspecific grants. In the fund financial statements, financial transactions and accounts of the Fire Authority are organized on the basis of funds. 44

45 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED BASIS OF PRESENTATION (Continued) GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued) The operation of each fund is considered to be an independent fiscal and separate accounting entity, with a self-balancing set of accounts recording cash and/or other financial resources together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. The fund statements are presented on a current financial resource and modified accrual basis of accounting. This is the manner in which these funds are normally budgeted. 45

46 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED BASIS OF PRESENTATION (Continued) GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued) Since the governmental fund statements are presented on a different measurement focus and basis of accounting than the government-wide statements' governmental activities column, a reconciliation is presented which briefly explains the adjustments necessary to reconcile the fund financial statements to the governmental activities column of the government-wide financial statements. The following is a brief description of the specific funds used by the Fire Authority: GOVERNMENTAL FUNDS These funds are those through which most governmental functions typically are financed. 46

47 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued) GOVERNMENTAL FUNDS (Continued) The acquisition, use, and balances of the Authority's expendable financial resources and the related current liabilities are accounted for through the Governmental Funds. These funds are as follows: General Fund This fund is used for all financial transactions not accounted for in another fund, including the general operating expenditures of the local unit. Revenues are derived primarily from assessments from participating municipalities. 47

48 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued) GOVERNMENTAL FUNDS (Continued) Debt Service Fund This fund is used to account for the accumulation of resources for, and the payment of, general long-term debt principal and interest. Both the General Fund and the Debt Service Fund are major funds for government-wide reporting purposes. MEASUREMENT FOCUS The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using the current financial resources measurement focus. 48

49 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) MEASUREMENT FOCUS (Continued) With this measurement focus, only current liabilities generally are included on the balance sheet in the funds statements. Long-term assets and long-term liabilities are included in the government-wide statements. Operating statements of the governmental funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. The government-wide Statement of Net Position and Statement of Activities are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these activities are included on the Statement of Net Position. 49

50 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) MEASUREMENT FOCUS (Continued) The Statement of Net Position and Statement of Activities are presented on the accrual basis of accounting. Under this method of accounting, revenues are recognized when earned and expenses are recorded when liabilities are incurred without regard to receipt or disbursement of cash. The fund financial statements of the General and Debt Service funds are maintained and reported on the modified accrual basis of accounting using the current financial resources measurement focus. Under this method of accounting, revenues are recognized in the period in which they become measurable and available. Interest income is recorded as earned. Federal and State reimbursement-type grants revenue is considered to be measurable and available as revenue when related eligible expenditures are incurred. 50

51 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) MEASUREMENT FOCUS (Continued) Expenditures, other than accrued interest and long-term debt, are recorded when the fund liability is incurred. The local government unit applies all GASB pronouncements as well as the FASB pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. ENCUMBRANCES Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriations, is employed for accountability purposes only. 51

52 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) ENCUMBRANCES It is the Fire Authority's policy to honor all unfilled contracts/orders at year-end, but the authority to complete these transactions is provided by the new year's budget appropriations, as unexpended appropriations of the current year lapse at year-end. CASH AND CASH EQUIVALENTS The Fire Authority pools cash resources of its various funds to facilitate the management of cash. Cash applicable to a particular fund is readily identifiable. The balance in the pooled cash accounts is available to meet current operating requirements. The Fire Authority classifies cash on hand, cash on deposit (including certificates of deposit), and highly liquid investments with an original maturity of ninety days or less when purchased as cash in its financial statements. 52

53 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) INVENTORIES Inventories of supplies are expended as received. RECEIVABLES Accounts which will be collected within sixty days of year-end are accrued as accounts receivable in the General Fund. On an annual basis the charges are reviewed for collectibility. INTEREST RECEIVABLE Interest on certificates of deposit is recorded as revenue in the year the interest is earned and is available to pay liabilities of the current period. 53

54 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION (Continued) DUE TO/FROM OTHER FUNDS Transactions between funds that had not been paid or received as of fiscal year-end have been recorded as inter-fund accounts receivable and payable in the financial statements. These inter-fund receivables and payables do not represent Board-approved loans between funds. DEFERRED REVENUE Deferred revenue in the fund statements represents amounts under the modified accrual basis of accounting for which asset recognition criteria have been met but for which revenue recognition criteria have not been met, whereby such amounts are measurable but not considered currently available resources. BUDGETS AND BUDGETARY ACCOUNTING The Authority follows the State of Michigan Uniform Budgeting and Accounting Act for budgeting procedures. Budgets are adopted on a basis consistent with generally accepted accounting principles. Annual appropriated budgets are adopted for the general fund. 54